May 2018

May 2018 Q & A

Question

With the new tax law and lower federal income tax rates, does it still pay to open a Roth IRA?

Answer

A Roth IRA requires no minimum distributions during your lifetime. The new tax laws also didn’t alter a Roth IRA’s tax-free qualified distributions and potential earnings. Another reason to consider this tax-free retirement savings vehicle is uncertainty. None of us can read a crystal ball, and today’s tax breaks could become tomorrow’s tax hikes. And remember that most of the new personal tax changes end after 2025, unless they are extended or made permanent.

Question

I read that the new tax cut bill will allow more companies to choose between the cash and accrual methods of accounting. My business generates under $15 million annually. Which is better for me?

Answer

You and your tax professional should decide which method ultimately works best for you, but generally cash accounting issimpler because you record income when received and expenses when paid. This can, however, make budgeting unpredictable. The accrual method of accounting records your income as you bill it and expenses as they occur, making budgeting a bit more predictable, but accounting a little more complicated. Only businesses generating $25 million or less get to choose between the two methods.

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